Income Tax Act 2007 section 257HB

Continuity of SEIS relief where issuing company is acquired by new company

Section 257HB preserves SEIS income tax relief when a new holding company is inserted above the original company that issued the SEIS shares, and shareholders exchange their original shares for shares in the new holding company.

• When a newly formed company acquires all shares in an existing SEIS company purely in exchange for its own newly issued shares, SEIS relief can be preserved provided HMRC give advance clearance that the share exchange is for genuine commercial reasons and not part of a tax avoidance arrangement.
• The share exchange is treated as tax-neutral for SEIS purposes: there is no disposal of the old shares or acquisition of the new shares, and any SEIS relief attributable to the old shares transfers automatically to the replacement shares in the new company.
• Old and new shares must correspond in type — each class of new share must be issued solely in exchange for old shares of the same class and rights, and must be allocated proportionally to the existing shareholders.
• The control and independence requirement that normally applies under SEIS rules is disapplied in relation to this type of share-for-share exchange or any arrangements made to carry it out.